NIGERIA - The Power Sector.

Nigeria has about 6,380 MW of installed electric power generating capacity, consisting of three hydro-based stations and six thermal power plants. Nigeria faces a serious energy crisis due to declining electricity generation from the older power plants. Power outages are frequent and the sector operates well below its capacity.

The Nigerian Electric Power Authority (NEPA) is in charge of a sector which is grossly inefficient. The government is hoping to increase foreign participation in the power sector and is looking for independent power producers (IPPs) to generate and sell electricity to NEPA.

In October 2000, NEPA signed a partnership agreement with South Africa's Eskom to help improve electricity supply. Eskom was to help develop NEPA's repair capabilities, execute transmission line projects, and participate in rehabilitate, operate and transfer (ROT) schemes for the running of its power stations. Shell in late 2001 was awarded a 15-year ROT contract for units 1-4 of the Afam power plant, and a lease operate and transfer (LOT) contract for Afam's fifth unit. Shell was to refurbish the Afam power plant at a cost of about $500m, and with a capacity expanding from 400 MW to 900 MW. Eskom was to provide management of maintenance and operations at Afam.

A 480 MW integrated cycle electric power plant, built by ENI of Italy and operating on two gas turbines and one steam turbine, was inaugurated April 1, 2005 at Okpai in the Delta State. The IPP, first of its kind realised in Nigeria by an oil company, came under a programme launched in 1999 by ENI to eliminate gas flaring in the area of its E&P operating arm Agip by 2008. Output from the Okpai IPP has increased power production in Nigeria by almost 15%.

Working through Agip, ENI is involved in various projects for making use of Nigerian gas, including export of LNG from the country's Bonny terminal and construction of another LNG plant at Brass. It is also involved in ethane supply to the Elene petrochemical plant at Port Harcourt.

The IPP, known as NAOC, is a joint venture of NNPC (60%), the operator ENI (20%), ConocoPhillips (20%). The IPP was originally planned to be on stream in 2004.

The privatisation of NEPA has been pushed back several times in recent years. But the determination of the new companies to be created from NEPA has been set. NEPA's transmission network will remain a single entity, the Nigeria Transmission Co. Generation will be split into six independent companies, with 11 companies to be created from NEPA's distribution operations. No firm timetable on the creation of the new companies has been announced.

Only 10% of rural households and about 45% of Nigeria's population have access to electricity. NEPA has planned to boost this share to 85% by 2010. NEPA's plan would call for an additional 15,000 km of transmission lines, 16 new power plants, and new distribution and marketing facilities. The government awarded contracts for three 335-MW gas-fired plants, valued at $1.1 bn, in November 2002. China's CMEC will build the facility at Okitipupa in Ondo State. A second plant, to be built by the Chinese firm, SEPCO, will be located at Papalanto in Ogun State. Seimens was to build the plant at Ajaokuta in Kogi state. The government has begun 1,400 rural electrification projects, and has awarded 410 new contracts.

Utilisation of renewable energy in Nigeria is limited. Although use of solid biomass, such as fuelwood, constitutes a major energy source for rural Nigerians, these traditional resources are not being consumed sustainably. The fuelwood being supplied for domestic needs is resulting in deforestation. In the 1990s Nigeria lost nearly 500 square miles of forested land annually, in part due to fuelwood consumption. Usage of hydropower, geothermal, and solar energy is still small, although there is a realisation that the renewable energy sector must grow in order for the country to develop sustainably.

Hydropower output has more than doubled since 1980. The seasonal nature of Nigerian rainfall limits hydropower from increasing in importance. Nevertheless, in May 2003 the government approved construction of a $6 bn, 3,960 MW hydropower project on the Mambila Plateau in north-east Nigeria.

Solar power is being promoted as a method to improve electricity service to rural villages not connected to the national power grid. In June 2003, Solar Electric Fund, a US-based NGO, provided a N40m grant to the state of Jigawa to aid in the supply of solar power to some selected villages in an effort to improve socio-economic conditions.

There have been increased efforts to boost the renewable energy sector as a whole. In May 2003 a new Nigerian NGO, the Centre for Renewable Energy Development in Nigeria (CREDN), called on the government to take added steps to boost the use of renewables and thereby diversify the country's energy base away from oil. CREDN has emphasised the fact that, despite Nigeria's vast oil wealth, many of the country's citizens do not have access to stable supplies of electricity. The group is pushing for increased use of solar, biomass, wind and geothermal sources in order to supplement the country's power production and provide a constant supply of electricity to all Nigerians.